Orient Securities released a research report stating that the inaugural year of the "16th Five-Year Plan" period will see the retail sector become a key focus for stimulating domestic demand, with growth driven by channel adjustments and emotional consumption. Cross-border e-commerce is enhancing its overseas competitiveness through product innovation and AI tools. The beauty and personal care industry is entering a new phase characterized by technological breakthroughs and omni-channel integration. The main views of Orient Securities are as follows: With the start of the 16th Five-Year Plan period, the retail sector is a crucial lever for boosting domestic demand, as channel optimization and the pursuit of emotional value continue to gain momentum. 1) The tone set by the Central Economic Work Conference emphasizes a domestic demand-led strategy for the 16th Five-Year Plan, further elevating the importance of the retail sector. Coupled with the boost from an extended Spring Festival holiday in 2026, leading regional retailers are expected to see a strong start in the first quarter. 2) Following initial explorations in 2024-25, retail companies are accelerating their restructuring efforts, with operational results already becoming visible. Future adjustments will continue to focus on compensation mechanisms, supply chains, and consumer scenarios (i.e., people, products, and places). 3) The rise of discount formats and emotional consumption continues, while concentration in jewelry and maternal-infant retail sectors is expected to increase further.
The momentum for overseas expansion remains strong, with improvements on the supply side of cross-border e-commerce and breakthroughs in product competitiveness. 1) Foreign trade in 2025 is expected to remain "confident, vibrant, and sharp," with significant room for the penetration rate of cross-border e-commerce to potentially double. Although the logic of cost-performance and quality-performance persists, leading companies are poised to accelerate their lead by leveraging product innovation and strengthening brand power. 2) Looking ahead to 2026, corporate profit margins for most companies are expected to recover against a backdrop of declining tariff costs. Tax inspections are promoting compliant industry development, while supply-side optimization is driving increased market concentration. 3) The US Black Friday sales event highlighted the growing importance of AI-driven traffic distribution logic. Cross-border B2B enterprises deepening innovation in AI tools are likely to see further revenue growth.
The narrative of diversification across brands, channels, and technology in the beauty and personal care sector is strengthening. 1) The gap between revenue growth and net profit growth attributable to shareholders in the A-share beauty and personal care sector has improved further. Although gross margins continue their upward trend, the gross margin-to-sales expense differential has narrowed slightly, indicating the industry is entering a new developmental stage. 2) The emergence of technologies like plant extraction and bio-fermentation is making raw materials—the "chips" of cosmetics—a key focus for companies. Innovations and applications of more ingredients, such as PDRN/ECM, are anticipated for 2026. 3) Against the backdrop of rising online customer acquisition costs, omni-channel integration is likely to become even more critical.
Investment recommendations: Offline retail-related targets include Chongqing Department Store, Miniso, Oriental Selection, and Kidswant. Overseas expansion chain-related targets include Yiwu China Commodities City, Focus Technology, Anker Innovations, Ugreen Group, and Sumec. Beauty and personal care-related targets include Shanghai Jahwa, Maogeping, Proya, Ruoyuchen, and Beauty Farm Medical Health. AI+ related targets include Conant Optical and Aishide. Risk warnings: Intensifying industry competition, resurgence of trade frictions, new product innovation falling short of expectations, and changes in underlying assumptions affecting forecast results.
